ECONOMIC GROWTH - The Economic Problem Wed.Continues...

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The Economic Problem Wed, 09/08/2010 …..Continues ECONOMIC GROWTH Economic growth comes from technological change and capital accumulation. In order to use resources in developing new technologies, we must decrease the production of consumption goods and services now. As production possibilities expand, consumption in the future can increase. Thus, a decrease in today’s consumption is the opportunity cost of tomorrow’s increase in consumption. The amount by which production possibilities expand depends on the resources devoted to technological development and capital accumulation. Note that economic growth does not imply end of scarcity. Even on the new PPF, we continue to face tradeoff and opportunity cost. Nations that devote almost their entire resources in the production of consumption goods and services, have their PPF virtually unchanged for decades. GAINS FROM TRADE A person who is more productive than others has absolute advantage . Such an individual can outperform others in everything. We see that Liz has an absolute advantage than Joe for she
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